While the supply of oil and gas assets for sale has increased in the past few years, it is still not enough to satisfy demand from buyers who are flush with capital, says Adrian Goodisman, managing director of Scotia Waterous’ Houston office. He spoke at the fifth annual A&D Strategies and Opportunities conference in Dallas recently, sponsored by Oil and Gas Investor and A&D Watch newsletter. In 2005, some $50 billion of cash flow was chasing $15 billion of assets for sale, he said. Transactions seem to be getting larger. Since the second half of 2004, the average quarterly transaction value has been about $4.3 billion, or more than double the four-year quarterly average recorded before then, he added. “Values are getting larger, but the number of deals has not grown that much more.” Roughly 50% of the dollars spent are by large-cap buyersâ€"companies whose market cap is greater than $5 billion. Examples include Apache Corp.’s purchase of Gulf of Mexico shelf assets from BP and Chesapeake Energy’s acquisition of two large producers in the Barnett Shale earlier this year. But large-caps also have been the leading sellers so far in 2006, as Pioneer Natural Resources, Kerr-McGee, Noble Energy and Cabot Oil & Gas have each divested Gulf of Mexico shelf assets. There are two types of private sellers, Goodisman said. One is type is the family-owned E&P company that sees this as a very good time to harvest, given the high prices buyers are willing to pay in today’s competitive, seller’s market. The other type is the private-equity-backed producer. Many of these are bringing their assets to market earlier in the build-and-sell cycle than ever before. Some sell in under two years, whereas the time frame used to be four to six years. For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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